I. What is partition?
Partition is the legal mechanism to force the sale or division of real property owned by multiple parties. If co-owners of real property are in disagreement about the sale of jointly owned real property, or if one owner is unfairly bearing the burden of taxes, insurance, and maintenance, the parties can request that a court order the property to be sold or divided. This article will focus on the remedy of a forced sale, and not the less common remedy of division.
II. What is the Uniform Partition of Heirs Property Act, and who does it apply to?
Prior to the enactment of the Uniform Partition of Heirs Property Act (the “Act”) effective July 1, 2020, there was only one available process to partition real property: one or more co-owners files a lawsuit against the other co-owners and asks the court to determine the rights of the parties (e.g., what percentage interest does each co-owner own; how much are they owed for reimbursement of taxes, insurance, and maintenance; etc.) and to order that the property be sold. The court has broad discretion under these “standard” partition laws to fashion an appropriate remedy. In a “standard” partition case, the court does not make a determination as to the value of the property; rather, the value is simply the highest and best offer to purchase the property at public auction.
The Act outlines a new additional procedure for partition actions filed after July 1, 2020, to the extent the property requested to be partitioned qualifies as “heirs property.” The Act defines “heirs property” as real property held in tenancy in common and
- there is no agreement in a record binding all the co-owners which govern the partition of the property, and
- one or more of the co-owners acquired title from a relative, whether living or deceased, and
- either 20% of more of the interests are held by co-owners who are relatives, or 20% or more of the interests are held by an individual who acquired title from a relative, whether living or deceased, or 20% or more of the cotenants are relatives.
The court is required to determine whether the property to be partitioned constitutes “heirs property,” and if so, the Act will apply unless all co-owners agree otherwise.
III. New Procedures Under the Act
The biggest difference between the procedure implemented under the Act and a “standard” partition procedure is that, under the Act, the Court is required to make an adjudication as the value of the property and provide co-owners with the right to buy out the parties requesting partition by sale.
Unless all co-owners have agreed to the value of the property, the court must order an appraisal unless it determines that the cost of an appraisal outweighs its evidentiary value. The court will appoint a disinterested real estate appraiser to determine the fair market value assuming sole ownership of the fee simple estate, and the appraiser will file a sworn appraisal with the court. Within 10 days of the appraisal being filed, the court is required to give notice to the parties with the appraised value and notify the parties they have the right to object within 30 days. Regardless of whether an objection is filed or not, the court is required to conduct a hearing 31 or more days after the notice of appraisal is sent to the parties, and may consider the appraisal and other evidence to make a final determination of the value of the property. At the hearing, the court will also determine any equitable accounting (i.e., how much each party may be owed for taxes, insurance, maintenance, etc.) and appropriately adjust any price, purchase price, apportioned price, buyout, judgment, or partition granted based on the results of the equitable accounting. The court is required to send another notice to the parties after the determination is made.
The court is also required to notify the parties that any co-owner except a co-owner that requested partition by sale may buy all the interests of the co-owners that requested partition by sale. A co-owner has 45 days to advise the court that he or she elects to buy out the interests of the co-owner that requested partition by sale. If one or more co-owners elects to purchase other interests in the property, the court will appropriately allocate interests and values and provide notice to the parties. Then the co-owner who wishes to buy out another co-owner will have 60 days to pay the apportioned buy-out price into the court registry. The court will then enter a judgment of partition reallocating all the interests of the co-owners and disburse the amounts held as appropriate.
If there is not a complete buyout of co-owners’ interests, the court will order a sale of the heirs property on the open-market, unless the court finds that a sale by sealed bids or auction would be more economically advantageous and is in the best interest of the co-owners as a group. Unless the parties can agree on a real estate broker within 10 days of the order of sale, the court will appoint a broker to offer the property for sale in a commercially reasonable manner at a price no lower than the value of the property as determined by the court. The Act provides specific rules and notice procedures concerning any offers for purchase that are obtained by the broker. Note that an existing co-owner may be the purchaser of the entire property and that purchaser is entitled to a credit against the price in an amount equal to his or her share of the proceeds.
IV. Attorneys’ Fees
Although the provisions in the Act do not expressly discuss the right to recover attorneys’ fees from the parties (either through judgment or from the net proceeds of the sale of the property), the Act incorporates the provisions of the “standard” partition laws to the extent they do not conflict with the Act. Thus, a strong argument could be made that recovery of attorneys’ fees is still available in an action to partition heirs property.